Trump Aims to Lower Drug Prices Via PBM Reform, Drug Importation

The Trump administration is aiming to lower drug prices by eliminating kickbacks to middlemen, like pharmacy benefit managers (PBMs), and increasing drug importation in three new executive orders signed Friday.

In the first executive order, the administration specifically plans to direct drug rebates to patients, which intends to save Medicare patients billions of dollars.

As part of the order, HHS Secretary Alex Azar must complete a rulemaking process, which should exclude safe harbor protections under the Anti-Kickback Statute. The exclusions should target retrospective reductions in drug prices that are not applied at the point-of-sale or other payments that drug manufacturers pay to health plan sponsors, pharmacies, or PBMs in Medicare Part D.

PBMs and other middlemen negotiate significant discounts off of the list prices, sometimes up to 50 percent of the cost of the drug.

Medicare patients end up paying more than they should for drugs because their cost sharing is typically based on list prices, while middlemen receive large rebate checks.

For example, the office of the inspector general at HHS found that patients in the phase of the Medicare Part D program saw their out-of-pocket costs for high-price drugs increase by 47 percent from 2010 to 2015, from $175 per month to $257 per month.  

Creating new safe harbors would permit the middlemen, including health plan sponsors, pharmacies, and pharmacy benefit managers, to apply discounts at the patient’s point-of-sale.

New safe harbors intend to save Medicare patients hundreds of thousands of dollars per year and would permit the use of certain bona fide pharmacy benefit manager service fees, the administration said. 

But the executive order also includes a provision requiring Azar to confirm that any rulemaking would not increase federal spending, Medicare beneficiary premiums, or patients’ total out-of-pocket costs. 

The second executive order focuses on access to affordable life-saving medications.

The price of insulin in the US has risen significantly over the past decade. The administration noted that the list price for a single vial of insulin today over $250 and most patients use at least two vials per month.

The order allows Americans without access to affordable insulin through commercial insurance or federal programs, such as Medicare and Medicaid, to receive products from federally qualified health centers (FQHCs) at a price that aligns with the cost at which the medication was acquired.

The final executive order centers on increasing drug importation to lower prices for American patients. 

As part of the order, Azar must take action to expand safe access to lower cost imported prescription drugs by facilitating grants to individuals of waivers of the prohibition of importation of prescription drugs.

He must also authorize the re-importation of emergency insulin products and complete the rulemaking process regarding the proposed rule.

“Premier is pleased to see the Administration reinvigorating the discussion around drug pricing and increased competition,” Blair Childs, senior vice president of public affairs at Premier said in an emailed statement. 

“We have been a long-time advocate for boosting competition in the drug marketplace to lower prices and bring the greatest value to our members and the communities they serve. The COVID-19 pandemic only intensifies the need to revive this debate and to use competitive forces to make life-saving treatments more affordable to Americans.”

While Premier praised the administration, Stephen J. Ubi, president and CEO of biopharmaceutical research company, PhRMA, was less optimistic about the administration’s efforts to lower drug costs.

“The administration’s proposal today is a reckless distraction that impedes our ability to respond to the current pandemic – and those we could face in the future. It jeopardizes American leadership that rewards risk-taking and innovation and threatens the hope of patients who need better treatments and cures,” Ubi said.

“The president’s attempt to open our country up to socialized health care sets America, our economic recovery and scientific progress back at a time when we need them most.”